Weak tourism, remittances hurt Egypt

Cairo, September 25, 2013

Egypt's non-oil imports fell sharply in the second quarter, but tourism receipts and worker remittances together fell by even more, causing the country's current account deficit to widen, according to central bank figures released on Tuesday.

The current account deficit in the April-June quarter widened to $1.70 billion, an increase of $160 million from the same quarter of 2012, according to a balance of payments statement posted on the bank's website.

Tourism, which had been gradually improving since Egypt's 2011 popular uprising caused it to collapse, was dampened during the quarter by boiling political tension in the lead-up to the army's ouster of Islamist President Mohamed Mursi on July 3.

It was also harmed when 19 tourists were killed in the crash of a hot-air balloon in February and by the appointment in mid-June of a governor to Luxor who was a member of a hardline Islamist group connected to the 1997 massacre of 58 tourists.

Tourism receipts tumbled to $1.67 billion in the second quarter, a decline of $663 million from a year earlier.

Remittances from Egyptians working abroad fell, perhaps because workers transferred their funds through unofficial channels to take advantage of a black market in foreign currency, one economist said.

Net private transfers, which the central bank said are made up mainly of worker remittances, fell to $4.65 billion for the second quarter, a drop of $351 million.

The Egyptian pound was fetching as much as 7.60 to the dollar on the market compared to less than 7.00 on the official market.

Imports fell after the Mursi government, squeezed for cash in its final months, suspended wheat purchases from abroad from mid-February to July. Non-oil imports fell to $10.98 billion, a decline of $587 million.

Oil exports for the quarter fell by $771 million on a year earlier, but this was largely cancelled out by a $615 million fall in oil imports.

Reuters calculated the quarterly figures by subtracting figures for the first three quarters of the fiscal year from the central bank's full-year figures. The fiscal year begins on July 1 and ends on June 30.

For the whole of the 2012/13 year, the current account narrowed to $5.58 billion from $10.15 billion a year earlier, the bank said.

Foreign direct investment into Egypt in the 2012/13 year fell to $3.00 billion from a revised $3.98 billion a year earlier. The central bank last year had put 2012/13 FDI at only $2.08 billion, but revised it to reflect new figures from the petroleum sector, it said.

During the April to June quarter, FDI fell to $1.63 billion, a decline of $232 million from the same quarter in 2012. -Reuters